Buying the Nifty on Friday, pre-breakout.

Gulshan makes a point: “As the nifty rises and broke out, suddenly momentum also turned up to this blog also (some times there was 1 or 2 comments and most of times it was 0). Everybody is proving to be right, then where were all when the nifty was in a range.”
He asks: “Tell me, if any person has taken a position in Nifty on 20-08-2009 based on assumptions which are posted now after the breakout.”.

My Notes: I am not sure why anyone should declare a breakout when the Nifty was in a trading range. I did not understand why we should be buying the Nifty on 20-08-09. On Friday, Sept 4, the Nifty rallied from its lows and was pushing against 4650 which was a minor three day resistance. As Nifty futures moved above 4650, I did buy the Nifty. In fact, the move from 4650 to 4680 was fast (5 minutes) so the actual entry was much higher than 4650.
I do not usually discuss my positions, but I explained the trade here since Gulshan was making a point that we are all discussing without action. That is not so. We do act on many ideas discussed here. In any case, this is not a trading journal. It is about using technical analysis in trading. I carry the trade as I write this blog, on tuesday morning.

Stops for the position trader MUST be trailing. Thanks to the parabolic advance, there are no logical stops. On the 60 minute futures chart, the average true range is currently 31.5 points. If I give a multiple of 3 to ensure that I am not stopped out due to noise, the stop is 3 * 31.5 = 94.5 points from the highest high of the up move. Today morning, the high of the move is 4805. So the stop is at 4805 – 95 = 4710. The stop will change (a) If the Nifty makes higher highs, (b) if the ATR changes, (c) If we start seeing divergence on the chart between price and an oscillator. – decrease the multiple. (d) When a minor low is made, at which point the stop can be some points below the low.
Have Fun!